An anti-trust ruling against one of the world's oldest tea companies is set to reshape Israel's $68 million tea market. The Israel Competition Authority (ICA) on June 26 designated Tel Aviv-based Wissotzky as a de-facto monopoly, ordering it to cease business practices that restrain competitors in the domestic market.
The Authority ruled that Wissotzky violated regulations restricting the practices of any company legally designated as a “large supplier.” The firm was found to have a market share greater than 70% in the green tea and herbal infusions categories, making it subject to these regulations.
The ruling orders Wissotzky to cease to require retailers to allot shelf space to its products according to its own terms. Wissotzky, which markets 200 tea blends, has hitherto demanded that retailers sell certain of its brands in order to be able to sell others. The ruling also prohibits the company from interfering in the final price charged to customers at retail locations.
The Authority did not restrict the sale of black and flavored black tea because Wissotzky’s market share was found to be less than 50% and falling, according to The Times of Israel. International sales practices of the 174-year old company were not covered.
Regulators conducted an 18-month investigation, which was followed by two months of anti-trust hearings. The black, green, and herbal segments each account for about one-third of the total market, which Wissotzky dominated, capturing as much as 76% of total sales. Competitors had for years complained that Wissotzky unduly influenced prices, preventing rivals from gaining sales even when they offered lower prices. The Authority heard testimony from brands that had entered the market with products that had been successful overseas and failed in Israel.
According to the Authority, Wissotzky’s “significant market power” in green tea allowed the company to charge higher prices than competitors. The company has the option of appealing the decision.
Wissotzky was founded in Moscow in 1849, soon expanding throughout Russia and Eastern Europe. By 1900, it had acquired tea gardens in Sri Lanka and India, allowing it to dominate the world market from the early 1900s until 1917, when the Russian Revolution forced it to relocate first to Poland, then London. It began operations in the Middle East in 1936. The company today owns a 37,000 sq. m tea manufacturing and packaging factory in Galilee. Wissotzky exports tea to the United Kingdom, Australia, Japan, Sweden, South Korea, Hungary, Russia, Ukraine, and the United States.
The Israel Competition Authority had not declared any food business a monopoly during the 20 years prior to this case. The 61 companies that are legally defined as "large suppliers" must comply with restrictions to prevent exploiting the public. Only a few beverage manufacturers, including Coca-Cola (Central Bottling) and Strauss Milk, are restricted by Israel’s Food Law. More are expected, according to a blog post by Lexology legal news.
Israel’s top economic official said he is “happy to see the Competition Authority waking up from a long sleep,” according to the Times of Israel. "My expectation from the competition authority — is to act decisively against anyone who prevents competition, acts as a monopoly, and oppresses the public,” said Nir Barkat, minister of industry and economy.